APRA, ASIC, and RBA Urge Financial Firms to Plan for LIBOR Transition
APRA published a letter by The Australian Securities and Investments Commission (ASIC) regarding preparations for the transition from London Interbank Offered Rate (LIBOR) to alternative benchmark rates. ASIC has written to the CEOs of several major Australian financial institutions regarding their preparations for the end of LIBOR. This initiative is strongly supported by APRA and the Reserve Bank of Australia (RBA).
LIBOR is used by many Australian financial institutions in their contracts and business processes. The UK FCA has stated that it will no longer use its powers to sustain LIBOR beyond 2021. This letter is aimed to help better understand how major Australian financial institutions are preparing to transition away from LIBOR to alternative benchmarks. ASIC, APRA, and the RBA are seeking assurance that the senior management in these institutions fully appreciates the impact and risks and is taking appropriate action ahead of the end of 2021. The financial regulators expect all institutions that rely on LIBOR to consider the impact of LIBOR transition on their business. Users of LIBOR should be aware of the size and nature of their exposures to LIBOR; put in place robust fall-back provisions in contracts referencing LIBOR; and be taking action to transition to alternative rates.
The letter states that the extent to which LIBOR may be embedded in a financial institution’s current business practices means the transition could be complex. The transition away from LIBOR may have significant implications on the entities’ risk management, operational processes and IT infrastructure. Insufficient preparations for the transition could have a negative impact on the entities’ business, clients, and the markets in which they operate.
Related Links
Keywords: Asia Pacific, Australia, Banking, Securities, LIBOR, LIBOR Alternatives, OTC Derivatives, ASIC, RBA, APRA
Related Articles
BIS Innovation Hub Sets Out Work Program for 2021
BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.
EC Plans to Consult on Crisis Management and EDIS Framework Revisions
In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.
EBA Finalizes Remuneration Standards for Investment Firms in EU
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
ECA Recommends Actions to Enhance Resolution Planning for Banks
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA Proposes Rules on Identity Verification of Depositor Protection
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB Publishes Work Program for 2021
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA Issues Update on Move to New Data Collection Platform
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank Publishes Derivation Rules for Reporting by Banks
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.